Detailed Rationale

CRISIL Ratings has revised its rating outlook on the long-term bank facilities of Rudra Solarfarms Private Limited (RSPL) to ‘Positive’ from ‘Negative’ and reaffirmed its rating at ‘CRISIL BBB+’. CRISIL Ratings has also withdrawn its rating on Rs.5.78 crore of long-term bank loan facilities upon request from the entity due to scheduled repayments of term loan and receipt of requisite documentation in line with the withdrawal policy of CRISIL Ratings.

 

The revision in outlook reflects that the credit profile may strengthen on account of sustenance of operating performance and timely collection of current dues from the counterparty seen in fiscal 2024, leading to sustenance of improved liquidity. Any change in this understanding will remain a key rating sensitivity factor.

 

Further, the rating reaffirmation factors improvement in the liquidity position, mainly driven by collection of old receivables from Telangana Southern Power Distribution Company Ltd (TSSPDCL) under new Electricity (Late Payment Surcharge and Related Matters) Rules, 2022, timely receipt of current billings. Also, actual operating performance in terms of Plant Load Factor (PLF) has been stable at 23%, and the same is expected to improve going forward.

 

The receivables position has improved to 86 days as on September 30, 2023 (291 days as on March 31, 2023; and 480 days as on March 31, 2022), thereby aiding liquidity and cash accruals. As of December 2023, the company continues to maintain a debt service reserve account (DSRA) equivalent to 6 months of debt servicing. RSPL also has cash equivalents of around Rs. 13.44 crores in addition to the DSRA. Going forward, the company is expected to always maintain liquidity of 9-12 months of debt obligations (inclusive of DSRA).

 

The ratings continue to reflect the comfort that the company derives from the long-term power purchase agreement (PPA) with TSSPDCL, which ensures high revenue visibility, support derived from being part of the Amp group and moderate financial risk profile. These strengths are partially offset by a weak counterparty risk profile and susceptibility to variation in solar irradiance.

Analytical Approach

To arrive at its rating, CRISIL Ratings has considered the business and financial risk profiles of RSPL on a standalone basis, using its criteria for rating solar power projects.

Key Rating Drivers & Detailed Description

Strengths:

• Revenue visibility through tie-up of long-term power purchase agreement (PPA): RSPL has signed a 25-year (valid till 2042) long-term PPA with TSSPDCL for the entire capacity of 15 megawatt (MW) at a fixed tariff of Rs 5.59 per kilowatt hour (Kwh). The operation and maintenance (O&M) of the plant is tied up with AmpIn Energy Transition Private Limited (AETPL) (erstwhile Amp Energy India Pvt Ltd), which also mitigates plant availability risks.

 

• Support derived from being part of the AMP group: The company benefits from an experienced management team in India and the expertise of its ultimate parent, AMP Group Inc. The group has been involved in the development and operation of solar projects of around 7 GW globally. It has demonstrated financial flexibility by raising funds from multiple investors. RSPL is part of a project financing equity arrangement involving CBRE Caledon Capital, a Canada-based infrastructure and private equity solutions provider. The AMP group also enjoys investment from Colorado-based Zoma Capital and global investment firm, the Carlyle Group. The Indian holding company, AETPL, has secured an investment from LGT Lightstone (part of the LGT group; one of the largest family-owned private banking and asset management group in Europe) of USD 50 million to fund growth in India while another investment of USD 45 million was committed by Core Infrastructure Investment Fund (CIIF) and SMBC Bank (Japan) along with AETPL to form a joint venture, namely Ampsolar Technology Private Limited  (in Q3FY24, AETPL has provided exit to both these investors and now holds 100% in Ampsolar Technology). The group had also secured an investment from Copenhagen Infrastructure Partners (Denmark-based renewable energy focused fund manager) of USD 150 million. This partnership aims to develop 1.7 GW of utility-scale and commercial and industrial renewable energy projects. In 2023, three marquee investors, Asian Infrastructure Investment Bank (AIIB); Sumitomo Mitsui Banking Corporation (SMBC; through its investment fund); and Intermediate Capital Group (ICG; through its subsidiary Atlanta Investment Pte. Ltd) have committed to investing USD250 million in AETPL for setting up its renewable energy projects, cell and module manufacturing business and other strategic businesses. Out of the total commitment, USD 125 million has already been infused.

 

RSPL’s Singapore-based parent, AMPSolar Asia Holdings PTE Ltd and the holding company AMPSolar Ventures Private Limited, has provided an unconditional and irrevocable guarantee for the company’s term loan till the project stabilization (includes achieving of P90 levels and other covenants as well). RSPL has received support in the form of Inter Corporate Deposits (ICDs) and short-term loans from other group entities in the past to cover the delay in payments by counterparty TSSPDCL. Furthermore, CRISIL Ratings understands that the group will continue to provide financial support to RSPL in case of any exigencies.

 

• Moderate financial risk profile: The project was funded in a debt-equity mix of 74:26 with a long debt tenor of 16 years. Equity is in the form of 13% compulsory convertible debentures (CCDs) subscribed by the promoter, which are convertible into equity after 20 years. The coupon payment on the CCDs is subordinate to debt servicing and has so far only been accrued. With its high tariff and long-term PPA, average debt service coverage ratio (DSCR) is healthy for the project. Moreover, a tail period of 6 years provides strong refinancing ability.

 

Weaknesses:

• Weak counterparty risk profile, albeit with improved payment track record: The company has tied up an offtake agreement with TSSPDCL, which has a weak credit risk profile. Timely realisation of dues is susceptible to the credit profile of the counterparty and can significantly impact the debt servicing ability of RSPL. The receivables position was around Rs 3.89 crore [86 days] as on September 30, 2023, vis-a-vis around Rs 12.44 crore [291 days] as on March 31, 2023, and Rs 20.96 crore [480 days] as on March 31, 2022. Improvement in receivables position is due to receipt of old dues via installments under new Electricity (Late Payment Surcharge and Related Matters) Rules, 2022 and current dues from TSSPDCL. However, going forward, timely receipt of payments will remain a key rating monitorable.

 

• Susceptibility to variation in solar irradiance: Solar power generation depends on the radiation level at a given location. Changes in average temperature around the location of a plant or in the performance of polycrystalline modules may affect power generation and can also result in higher-than-expected degradation in solar panels. Given that the cash flow of a solar power project is most sensitive to the plant load factor (PLF), these risks may impair the debt-servicing capability of projects.

 

The company has undergone a yield reassessment and there has been a revision in the benchmark P90 PLFs to 23.07% from 24.24% previously. While the average PLF of the asset for the last five years through fiscal 2023 is underperforming the revised P90 levels, actual PLFs in trailing 12 months ending October 31, 2023 has improved. As per management articulation, the underperformance in the past has been largely due to lower-than-expected irradiance level and lower grid availability. However, existing performance guarantees from O&M contractor, AETPL, will allay systemic project generation risks. That said, the PLF levels will remain a key monitorable going forward. 

Liquidity: Adequate

Liquidity is marked by cash equivalents of Rs 13.44 crore over and above DSRA of Rs 5.80 crores as of December 2023. The annual cash accruals (Rs 4-5 crores) along with the existing cash equivalents should suffice to cover the debt obligations for the current and next fiscal. Going forward, the company is expected to maintain liquidity of 9-12 months (inclusive of DSRA) of debt obligations going forward.

Outlook: Positive

Business profile may improve further due to sustenance in improvement in the generation and timely receipt of current dues from the counterparty. The company is expected to benefit from stable revenue visibility backed by long-term PPA and timely support from group entities.

Rating Sensitivity factors

Upward factors

• Improvement in operating performance with PLF achieving P90 levels on a sustained basis.
• Sustained receivables position along with sustenance of improved liquidity.
• Significant decline in debt leading to material improvement in DSCR.

 

Downward factors

• Weakening of the operating performance with reduction in the PLF below average levels (22%) impacting the cash accruals or sustenance of high receivables position above 7-8 months.
• Any change in the support philosophy from the AMP group to RSPL.
• Increase in debt leading to substantially lower DSCR.

About the Company

RSPL is a special-purpose vehicle floated by Suzlon Energy Ltd (Suzlon) as a part of the 210 MW of solar projects that Suzlon had won in Telangana through a competitive bidding process in 2015. In December 2016, Suzlon sold 49% stake in RSPL to the AMP group for Rs 14 crore with an option to sell the remaining 51% to the group. The AMP group acquired the balance stake in January 2019.

 

RSPL owns a 15 MW AC (18 MW DC) solar photovoltaic plant in Telangana. The project was commissioned in June 2017.

Key Financial Indicators

Particulars	Unit	FY 2023	FY 2022
Revenue	Rs.Crore	16	16
Profit After Tax (PAT)	Rs.Crore	(1)	(1.7)
PAT Margin	%	(6.5)	(10.8)
Interest coverage	Times	1.50	1.4
Adjusted debt/adjusted networth	Times	7.57	8.8

*As per analytical adjustments made by CRISIL Ratings

Any other information: Not Applicable